<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 2-23416
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BOSTON GAS COMPANY
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(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1103580
----------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE BEACON STREET, BOSTON, MASSACHUSETTS 02108
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(Address of principal executive offices)
(Zip Code)
617-742-8400
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(Registrant's telephone number, including area code)
NONE
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Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Common stock of Registrant at the date of this report was 514,184 shares, all
held by Eastern Enterprises.
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FORM 10-Q
Page 2
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
- - -----------------------------
Company or group of companies for which report is filed:
BOSTON GAS COMPANY AND SUBSIDIARY ("Registrant")
CONSOLIDATED STATEMENTS OF EARNINGS
- - -----------------------------------
<TABLE>
<CAPTION>
(In Thousands)
For The Three Months Ended For The Nine Months Ended
-------------------------- -------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1994 1993 1994 1993
------ ------- ------ ------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Cost of gas sold $ 72,114 $ 66,606 $509,222 $453,399
Operating Margin 37,411 37,559 297,525 279,861
-------- -------- -------- --------
34,703 29,047 211,697 173,538
OPERATING EXPENSES:
Other operating expenses 33,736 31,769 115,473 97,205
Maintenance 4,410 4,933 19,227 22,793
Depreciation and amortization 4,962 3,564 26,928 19,210
Income taxes (5,575) (5,698) 13,578 8,048
-------- -------- -------- --------
Total Operating Expenses 37,533 34,568 175,206 147,256
-------- -------- -------- --------
OPERATING EARNINGS (LOSS) (2,830) (5,521) 36,491 26,282
OTHER EARNINGS, NET 41 251 113 319
-------- -------- -------- --------
EARNINGS (LOSS) BEFORE INTEREST EXPENSE (2,789) (5,270) 36,604 26,601
INTEREST EXPENSE:
Long-term debt 4,248 3,695 12,750 11,758
Other, including amortization
of debt expense 1,875 627 3,421 1,977
Less - Interest during construction (261) (156) (552) (341)
-------- -------- -------- --------
Total Interest Expense 5,862 4,166 15,619 13,394
-------- -------- -------- --------
NET EARNINGS (LOSS) (8,651) (9,436) 20,985 13,207
Preferred Stock Dividends 482 455 1,445 908
-------- -------- -------- --------
NET EARNINGS (LOSS) APPLICABLE TO
COMMON STOCK $ (9,133) $ (9,891) $ 19,540 $ 12,299
-------- -------- -------- --------
COMMON STOCK DIVIDENDS $ - $ - $ 12,032 $ 8,355
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FORM 10-Q
Page 3
Boston Gas Company and Subsidiary
- - ---------------------------------
Consolidated Balance Sheets
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<TABLE>
<CAPTION>
(In Thousands)
Sept. 30, Sept. 30, Dec. 31,
1994 1993 1993
-------- -------- -------
<S> <C> <C> <C>
ASSETS
GAS PLANT, at cost $ 653,102 $ 621,188 $ 649,580
Construction work-in-progress 38,332 27,670 8,131
Less-Accumulated depreciation 215,993 197,897 195,284
---------- ---------- ---------
Total Net Plant 475,441 450,961 462,427
---------- ---------- ---------
CURRENT ASSETS:
Cash 666 1,062 1,160
Accounts receivable, less reserves
of $16,472 and $13,206 at
September 30, 1994 and 1993,
respectively, and $13,518 at
December 31, 1993 48,141 51,485 89,096
Deferred gas costs 82,417 49,227 65,802
Natural gas and other inventories 47,868 54,018 53,152
Materials and supplies 5,481 5,770 5,019
Prepaid expenses 4,920 3,659 3,708
Income taxes 6,450 7,635 6,046
---------- --------- ---------
Total Current Assets 195,943 172,856 223,983
---------- --------- ---------
OTHER ASSETS:
Deferred postretirement benefit cost 98,513 101,641 101,182
Deferred charges and other assets 20,125 26,235 46,848
---------- --------- ---------
Total Other Assets 118,638 127,876 148,030
---------- --------- ---------
TOTAL ASSETS $ 790,022 $ 751,693 $ 834,440
========== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FORM 10-Q
Page 4
Boston Gas Company and Subsidiary
- - ---------------------------------
Consolidated Balance Sheets
- - ---------------------------
<TABLE>
<CAPTION>
(In Thousands)
Sept. 30, Sept. 30, Dec. 31,
1994 1993 1993
-------- -------- -------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDER'S INVESTMENT
CAPITALIZATION:
Stockholder's investment -
Common stock, $100 par value,
514,184 shares authorized and outstanding $ 51,418 $ 51,418 $ 51,418
Amounts in excess of par value 43,233 43,233 43,233
Retained earnings 103,188 90,596 95,680
--------- --------- ---------
Total Common Stockholder's Investment 197,839 185,247 190,331
Variable term cumulative preferred stock,
$1 par value, 1,200,000 shares authorized
and outstanding 29,221 29,191 29,197
Long-term obligations, less current portion 202,778 171,433 171,345
--------- --------- ---------
Total Capitalization 429,838 385,871 390,873
Gas Inventory Financing 49,883 50,987 59,297
--------- --------- ---------
Total Capitalization and Gas Inventory
Financing 479,721 436,858 450,170
--------- --------- ---------
CURRENT LIABILITIES:
Current portion of long-term obligations 1,880 2,156 2,165
Notes payable 63,700 64,300 106,300
Accounts payable 34,975 44,207 52,773
Accrued taxes 644 311 161
Accrued interest 7,590 6,405 3,004
Customer deposits 2,726 2,535 2,597
Refunds due customers 15,096 10,400 8,029
Pipeline transition costs - - 24,174
--------- --------- ---------
Total Current Liabilities 126,611 130,314 199,203
--------- --------- ---------
OTHER LIABILITIES:
Deferred income taxes 61,626 56,674 61,561
Unamortized investment tax credits 8,884 9,599 9,427
Postretirement benefits obligation 90,555 92,101 91,955
Other 22,625 26,147 22,124
--------- --------- ---------
Total Other Liabilities 183,690 184,521 185,067
--------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S INVESTMENT $ 790,022 $ 751,693 $ 834,440
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FORM 10-Q
Page 5
Boston Gas Company and Subsidiary
- - ---------------------------------
Consolidated Statements of Cash Flows
- - -------------------------------------
<TABLE>
<CAPTION>
(In Thousands)
For The Nine Months Ended
-------------------------
Sept. 30, Sept. 30,
1994 1993
-------- --------
<S> <C> <C>
Cash flow from operating activities:
Net earnings $ 20,985 $ 13,207
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 26,928 19,210
Deferred taxes 65 3,950
Other changes in assets and liabilities:
Accounts receivable 40,955 21,771
Inventory 4,822 (11,998)
Deferred gas costs (16,615) (8,359)
Accounts payable (17,798) (8,896)
Accrued interest 4,586 3,084
Federal and state income taxes (404) (2,588)
Refunds due customers 7,067 (2,661)
Other 3,726 (3,948)
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Net cash provided by operating activities 74,317 22,772
--------- ---------
Cash flows from investing activities:
Capital expenditures (36,945) (27,422)
Net cost of removal (4,777) (3,057)
--------- ---------
Net cash used for investing activities (41,722) (30,479)
--------- ---------
Cash flow from financing activities:
Capital contribution from Parent - 20,000
Changes in short-term debt, net (42,600) 10,968
Changes in inventory financing (9,414) 2,356
Proceeds from issuance of long-term debt 36,000 -
Repayment of long-term debt (3,622) (20,480)
Proceeds from issuance of preferred stock 24 (245)
Cash dividends paid on common and preferred stock (13,477) (9,130)
--------- ---------
Net cash used for financing activities (33,089) 3,469
--------- ---------
Increase (decrease) in cash (494) (4,238)
Cash at beginning of period 1,160 5,300
--------- ---------
Cash at end of period $ 666 $ 1,062
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 10,793 $ 10,715
Income taxes $ 14,122 $ 9,894
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FORM 10-Q
Page 6
BOSTON GAS COMPANY AND SUBSIDIARY
---------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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SEPTEMBER 30, 1994
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1. ACCOUNTING POLICIES AND OTHER INFORMATION
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General
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It is the Registrant's opinion that the financial information contained in
this report reflects all normal, recurring adjustments necessary to
present a fair statement of results for the period reported, but such
results are not necessarily indicative of results to be expected for the
year due to the seasonal nature of the Registrant's business. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in this Form 10-Q pursuant to
the rules and regulations of the Securities and Exchange Commission.
However, the disclosures herein, when read with the annual report for 1993
filed on Form 10-K, are adequate to make the information presented not
misleading.
Seasonal Aspect
---------------
The amount of natural gas sold by the Registrant for purposes of space
heating is directly related to the ambient air temperature. Consequently,
less gas is sold during the summer months than is sold during the winter
months. In order to more properly match depreciation and property tax
expense with gas sales revenues each month, the Registrant charges to
depreciation and property tax expense an amount equal to the percentage of
the annual volume of firm gas sales forecasted for the month, applied to
the estimated annual depreciation and property tax expense.
2. GAS INVENTORY FINANCING
-----------------------
Under the terms of the general rate order issued by the Massachusetts
Department of Public Utilities (the "Department") effective October 1,
1988, the Registrant funds all of its inventory of gas supplies through
external sources. All costs related to this funding are recoverable from
its customers. The Registrant maintains a credit agreement with a group of
banks which provides for the borrowing of up to $90,000,000 for the
exclusive purpose of funding its inventory of gas supplies or for backing
commercial paper issued for the same purpose. At September 30, 1994 and
1993, the Registrant had $49,883,000 and $50,987,000, respectively, of
commercial paper outstanding for this purpose. Since the commercial paper
is supported by the credit agreement, these borrowings have been
classified as non-current in the accompanying consolidated balance sheets.
<PAGE>
FORM 10-Q
Page 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- - ------- -----------------------------------------------------------------------
OF OPERATIONS:
--------------
RESULTS OF OPERATIONS
---------------------
The seasonal net loss of $9.1 million for the third quarter of 1994 was
$.8 million less than the $9.9 million reported for the same period in
1993. The benefit of higher rates ($2.3 million) which took effect
November 1, 1993 was partially offset by increased charges for
depreciation and employee benefits.
Net earnings applicable to common stock for the first nine months of
1994 were $19.5 million, an increase of $7.2 million or 59% from the
same period in 1993. This increase was primarily the result of higher
rates. Weather for the first nine months of 1994 was 6.5% colder than
normal compared to slightly warmer than normal weather for the same
period in 1993. However, the benefit of colder weather was approximately
$1 million after considering the higher operating costs associated with
the unusual first quarter weather. Increased sales to new firm customers
also contributed to the improved earnings. The increase was partially
offset by higher charges for depreciation, property taxes and bad debts.
LIQUIDITY & CAPITAL RESOURCES
-----------------------------
Notes payable at September 30, 1994 were $63.7 million, a decrease of
$42.6 million from December 31, 1993. The majority of this decrease
reflects the use of proceeds from the January 1994 issuance of $36.0
million of Medium-term notes Series B pursuant to a $50.0 million shelf
registration statement dated October 28, 1992 on file with the
Securities and Exchange Commission. The issued notes have a weighted
average maturity of 24 years and a coupon rate of 6.94%. The balance of
the decrease in notes payable reflects a reduction in working capital
requirements due to the seasonal nature of the gas distribution
business.
Cash from operations during the first nine months of 1994 was sufficient
to cover dividends to shareholders, capital expenditures and debt
repayments including the above mentioned notes payable.
Capital expenditures for the full year are expected to approximate $53.0
million.
The Registrant believes that projected cash flow from operations, in
combination with currently available resources, is sufficient to meet
1994 capital expenditure and working capital requirements, normal debt
repayments and dividends to shareholders.
<PAGE>
FORM 10-Q
Page 8
PART II. OTHER INFORMATION
--------------------------
ITEM 1. LEGAL PROCEEDINGS
- - --------------------------
Other than the ordinary routine litigation involving the Registrant's
business, there are no material pending legal proceedings involving the
Registrant.
ITEM 2. CHANGES IN SECURITIES
- - ------------------------------
At September 30, 1994, under the most restrictive provision limiting dividend
payments in the Registrant's financing indentures, there were no restrictions
on retained earnings available for dividends.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - ------------------------------------------------------------
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - -----------------------------------------
(a) List of Exhibits
27 - Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter for which this
report is filed.
<PAGE>
FORM 10-Q
Page 9
SIGNATURES
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It is the Registrant's opinion that the financial information contained in
this report reflects all normal, recurring adjustments necessary to a fair
statement of results for the period reported, but such results are not
necessarily indicative of results to be expected for the year due to the
seasonal nature of the business of the Registrant. Except as otherwise herein
indicated, all accounting policies have been applied in a manner consistent
with prior periods. Such financial information is subject to year-end
adjustments and an annual audit by independent public accountants.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Boston Gas Company
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(Registrant)
/s/ Joseph F. Bodanza
--------------------------------------------------
J. F. Bodanza, Senior Vice President and Treasurer
(Principal Financial and Accounting Officer)
Dated: October 31, 1994
------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from
Consolidated Statement of Earnings, Consolidated Balance Sheets and Consolidated
Statement of Cash Flows, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 475,441
<OTHER-PROPERTY-AND-INVEST> 2,547
<TOTAL-CURRENT-ASSETS> 195,943
<TOTAL-DEFERRED-CHARGES> 17,578
<OTHER-ASSETS> 98,513
<TOTAL-ASSETS> 790,022
<COMMON> 51,418
<CAPITAL-SURPLUS-PAID-IN> 43,233
<RETAINED-EARNINGS> 103,188
<TOTAL-COMMON-STOCKHOLDERS-EQ> 197,839
29,221
0
<LONG-TERM-DEBT-NET> 198,400
<SHORT-TERM-NOTES> 11,700
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 101,883
<LONG-TERM-DEBT-CURRENT-PORT> 480
0
<CAPITAL-LEASE-OBLIGATIONS> 4,378
<LEASES-CURRENT> 1,400
<OTHER-ITEMS-CAPITAL-AND-LIAB> 244,721
<TOT-CAPITALIZATION-AND-LIAB> 790,022
<GROSS-OPERATING-REVENUE> 509,222
<INCOME-TAX-EXPENSE> 13,578
<OTHER-OPERATING-EXPENSES> 115,473
<TOTAL-OPERATING-EXPENSES> 175,206
<OPERATING-INCOME-LOSS> 36,491
<OTHER-INCOME-NET> 113
<INCOME-BEFORE-INTEREST-EXPEN> 36,604
<TOTAL-INTEREST-EXPENSE> 15,619
<NET-INCOME> 20,985
1,445
<EARNINGS-AVAILABLE-FOR-COMM> 19,540
<COMMON-STOCK-DIVIDENDS> 12,032
<TOTAL-INTEREST-ON-BONDS> 12,750
<CASH-FLOW-OPERATIONS> 74,317
<EPS-PRIMARY> 38.00
<EPS-DILUTED> 38.00
</TABLE>
